Assignment2 Ecf 5030

Time and again old proverbial wisdom states that savings is one of the best virtues, and that

spending/wasting money leads to bad consequences (Hazlitt, 1948). Classical economists have

cited that saving policy is best for yourself as well as the nation. However, logical and modern

economists like Henry Hazlitt are attacking this belief. According to him, focusing on spending

than savings. Buying maximum output/goods from the current producers is key to the economic

growth that is the more spent the better. This means the more the confident the user, the more

confidently he would spend, the more he spends, the better the health of the economy. This essay

critically analyses the fallacy of spending is better than saving.

In the nineteenth century it was believed that if humans go on saving money again and again it is

doing nothing but making the cake large and large without humans eating the cake (Hazlitt,

1948). Renowned economists on spending more than saving have cited many Fallacies, however

it is necessary to deep dive into this fallacy of saving is the new spending. “Money is not worth

anything”(saving and spending, 1944, Para 1), thus spending whatever money one has from the

fear of inflation. Every penny that is saved is a deduction from somebody else’s income. The

money that people save from refraining themselves from buying goods from a grocery store is

the money that grocery store owners loses from their income. Savings ultimately hurts some of

the existing businesses. So far, saving means as important to consumers as spending (Cunniff,

2001). The classical theory of saving depended for its validity on the identification of capital

with the wages fund. It meant simply expanding the size of wages fund. What the capitalists

saved was consumed by the laborers, resulting a balanced production. However, Modern theory

says the more you spend the more you save for the economy (The...